11 August 2026
10 min
Human rights can feel difficult to discuss in an investment context, because they concern how people are treated, protected and valued. While human rights violations raise important ethical considerations, a question for asset owners is the extent to which these issues are also financially material.
In this blog, we explore how human rights failures can contribute to litigation, regulatory penalties, operational disruption, reputational damage and other consequences that may affect the long-term value of investments. We also touch on how asset owners can take these risks into account, particularly when engaging with asset managers.
Exposure to human rights issues can arise from investing in companies with operations or supply chains linked to conflict‑affected or high‑risk regions, or from investment companies without robust labour practices.
Human rights issues can arise across sectors, geographies and asset classes. The risks can be direct, such as workplace safety failures, or indirectly, through exposure to suppliers linked to forced labour, child labour, unsafe working conditions or community harm. Where companies fail to identify and manage human rights risks, the consequences can become financial. They may include litigation, regulatory penalties, operational disruption, remediation costs, loss of contracts, higher financing costs, weaker consumer trust and, in some cases, a lower company valuation.
Supply chains are often long, fragmented and data-poor, meaning investors may have exposure to labour rights risks that are not immediately apparent. MSCI research published in December 2025 found that only 3% of companies in the MSCI ACWI Index reported on modern slavery risks, while nearly 40% may have exposure to forced or child labour somewhere in their value chains.
This is becoming more relevant as regulation and market practice move towards greater supply chain transparency and holding companies accountable. The EU Corporate Sustainability Due Diligence Directive, for example, is designed to require in-scope companies to identify, prevent, mitigate and remediate adverse human rights and environmental impacts in their operations and chains of activities. The directive introduced financial penalties for non-compliance, highlighting the potential financial and reputational risks for investors.
For asset owners, this underlines the importance of asking managers how they identify, prioritise and act on social risks. A lack of perfect data should not mean inaction. It should prompt better questions about due diligence, escalation, engagement outcomes and how managers use the information that is available. The DWP's 2024 Taskforce on Social Factors guidance reinforces this by highlighting labour rights, health and safety, supply chain issues and modern slavery as social factors that may be financially material for pension schemes.
In July 2020, allegations were published about poor working conditions and low pay in parts of Boohoo's Leicester supply chain. Boohoo commissioned an independent review, which found that allegations of poor working practices were substantially true and that the monitoring of the supply chain had been inadequate. The allegations were followed by a 42% fall in Boohoo's share price.
The longer-term significance for investors extends beyond the initial market reaction, with damaged trust in the company's governance and oversight processes, contributing to ongoing reputational challenges and heightened stakeholder scrutiny.[1] In 2024, a group of institutional investors brought legal proceedings alleging that Boohoo had failed to adequately disclose information relating to working conditions within its Leicester supply chain. By July 2026, the reported value of claims had risen to £245m. Boohoo strongly contests the allegations and intends to defend the claim.[2]
Child labour in West African cocoa supply chains is not a new issue, but recent litigation demonstrates that it remains financially relevant. In 2025 and 2026, a series of legal actions were brought against major confectionery and cocoa companies, alleging they had failed to adequately address or disclose child labour risks within their supply chains.
While the allegations are disputed, the cases highlight how human rights risks can translate into litigation costs, reputational damage, regulatory scrutiny and increased due diligence obligations.
These examples demonstrate how human rights issues are translated into financial risks in different ways. In some cases, impacts may be linked to a specific event, while in others, they arise through longstanding issues that take years to come to light. The financial consequences may not always be immediate or easy to quantify, but can emerge over time.
For asset owners, the challenge is how to deal with these complex and underreported issues and consider what to do, given limited time and resources. Most asset owners rely on their managers to identify, monitor and engage on human rights risks across portfolios – so it’s incumbent on asset owners to hold their managers to account.
Practically, this means asking challenging questions of managers. How do they identify and prioritise human rights risks, engage with companies on issues such as labour rights, modern slavery and supply chain oversight? How do they demonstrate that these risks are being considered as part of investment decision-making and stewardship?
We are currently assessing how asset managers identify, manage and engage on modern slavery risks across listed equities and listed credit, with the findings designed to help asset owners ask better questions and strengthen oversight. Look out for the upcoming paper, where we’ll share our key findings and practical considerations for engaging with managers.
Measuring exposure to human rights risks remains challenging, but a growing range of frameworks and benchmarks are helping to improve transparency. Resources such as the UN Guiding Principles on Business and Human Rights, the Corporate Human Rights Benchmark and the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) provide valuable insights into how companies identify, manage and disclose human rights risks. For asset owners looking to deepen their understanding, these frameworks can support more informed conversations with managers about their approach to managing social risks and their stewardship activities.
If you’d like to discuss how to better understand human rights risk in your investments, reach out to the author of this article or get in touch.
References
[1] Macfarlanes, Boohoo investors seek damages following share price decline over ESG disclosures. Available at macfarlanes.com, Retail Gazette, Boohoo suppliers. Available at: retailgazette.co.uk,
[2] Macfarlanes, Boohoo investors seek damages following share price decline over ESG disclosures. Available at: macfarlanes.com; Lawyer Monthly, Boohoo faces £245m High Court investor claim over Leicester supply chain. Available at: lawyer-monthly.com, Yahoo Finance, Boohoo hit with legal claim. Available at: finance.yahoo.com
Please note the value of investments, and income from them, may fall as well as rise. This includes but is not limited to equities, government or corporate bonds, derivatives and property, whether held directly or in a pooled or collective investment vehicle. Further, investments in developing or emerging markets may be more volatile and less marketable than in mature markets. Exchange rates may also affect the value of investments. As a result, an investor may not get back the full amount of the original investment. Past performance is not necessarily a guide to future performance.
This communication has been compiled by Hymans Robertson LLP® (HR) as a general information summary and is based on its understanding of events as at the date of publication, which may be subject to change. It is not to be relied upon for investment or financial decisions and is not a substitute for professional advice (including for legal, investment or tax advice) on specific circumstances. HR accepts no liability for errors or omissions or reliance on any statement or opinion. Where we have relied upon data provided by third parties, reasonable care has been taken to assess its accuracy however we provide no guarantee and accept no liability in respect of any errors made by any third party.
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